Daily Archives: January 27, 2009

And Tucson’s no different from the Hamptons

Buyers refuse to look at over-priced houses.

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The Hamptons – not much different than Greenwich

And why should they be? Same people, same jobs. And out there, just like here, sellers have one perception of reality, buyers another. Some agents are trying auctions to flush out buyers who have cash but no strong desire to pay 2006 prices. I’m dubious – the auctions that have been tried here – one on Taconic Road, another a “lake chateau” in New Canaan – were busts, but the agents quoted make sense in other ways.

Do desperate times call for desperate measures?

Perhaps. But as sales have fallen off over the past year, many real estate agents have sung a familiar tune: There are eager buyers, with deep pockets, in the East End real estate market—if the price is right.

Many experienced real estate agents have complained in recent months that the sellers they are brokering for are stuck in the past, when home values climbed 20 percent a year. Those days are clearly over, at least for the time being, and selling a house now means finding the price that buyers will bite at.

Identifying that “right” price can be difficult though.

Two local brokers think that the trick might just be a matter of letting buyers, or bidders, set the going rate. Start at an absolute minimum and see how high the bidding goes.

“I did seven deals in December all because I convinced the sellers to bring their prices down to a level that I knew they would sell at,” says Enzo Morabito, one of two Prudential Douglas Elliman brokers who are organizing a house auction—not of houses in foreclosure, just ones that need to get sold soon.

Rather than merely trying to convince all their clients that they need to lower their prices, Mr. Morabito and fellow Prudential vice president Vince Horcasitas are out looking specifically for those motivated sellers who don’t need convincing—they just need buyers.

Mr. Morabito and Mr. Horcasitas think that putting properties that must sell on the auction block, selling to the highest bidder, will naturally bring that “right” price for a given property.

The pair is compiling a small collection of properties owned by people who need to sell sooner, rather than later and will put them up for auction sometime in February. “There’s inventory out there that people can’t sell at the 2006, 2007 prices that we think there will be buyers for at some price,” Mr. Morabito said. “If they have a $3 million loan they payments may be $14,000 to $20,000 a month. That’s $300,000 a year. Time is really of the essence in some cases.

“I’ve told people if they can wait two years, don’t sell, but if they can’t they need to do something,” he said. “We’re doing something.”

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Amazon to introduce gen 2 Kindle?

That’s what USA Today speculates. Friends who have the first generation Kindle love it but they all travel – how neat to have every book you could possibly want on one, lightweight reader? But I don’t travel much, and certainly not by plane if I can help it – I don’t have the patience for idiot federal government security thugs, so I can’t figure out how I’d use one. Reading while driving is probably not illegal because no one’s thought to ban it yet but it doesn’t seem wise. Yet I want one of these, just as I lusted for years after a pair of binoculars with a built in compass which are really useful only on a boat, and I didn’t have a boat. I never did succumb to the call of those binoculars but I’m trying very hard to come up with reason why I need a Kindle. If any of you have solved this problem, please let me know.

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I hadn’t realized bankers had it so tough

I was clueless about their plight until Instapundit linked to this sad story of a banker’s mistress and the havoc the mortgage meltdown is wreaking on her relationship.  Her poor lover’s in pain, and I never even thought to send flowers.

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NBC should run this PETA ad

I thought this was a joke but it’s not. NBC has rejected an ad scheduled for the Super Bowl by PETA because, among other things, the ad depicted panty-clad babes committing unnatural acts with vegetables. I wish the network would run the ad because there are still some people in this country who think that the organization is a mainstream outfit with sane members. Come on, guys – let PETA be PETA and set them back for ten years until memory fades.

PETA says NBC’s specific list of complaints were that the commercial included:

  • licking pumpkin
  • touching her breast with her hand while eating broccoli
  • pumpkin from behind between legs
  • rubbing pelvic region with pumpkin
  • screwing herself with broccoli (fuzzy)
  • asparagus on her lap appearing as if it is ready to be inserted into vagina
  • licking eggplant
  • rubbing asparagus on breast

‘Veggie Love’: PETA’s Banned Super Bowl Ad

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One Global Warmist says we’ll be dead in four years, NOAA says climate change is already irreversible.

I say, let’s not spend Fifty  Gadzillion trillion dollars to stop something that can’t be stopped. Save those bucks for air conditioners for the Eskimos.

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Don’t any of these guys know how to do anything?

Dealbreaker reports that Art Nadel, Ponzi artist wannabe, has surrendered to the cops in Tampa. This was the old guy (but still 8 years younger than his mentor, Walter Noel) who skipped out when it was discovered he was shy about $350 million (or $750 milion – who keeps track these days?) from the assets he was supposed to be managing. Ironicall, he, like Walter Noel, may have been a Madoff victim because after years of benign neglect from his investors, a couple of them grew worried when Bernie was exposed as a fraud and decided to finally perform an audit of Nadel’s books. He fled the next day. 

Tip for fraudsters – always have a get away plan, damn it! If you’re going to steal, at least consider the possibility that you might get caught and do a little advance planning. I’ll bet Bernie did, and at least his money escaped.

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Uh oh – I wondered when this would happen

My favorite local mad blogger at Greenwich Roundup has been told by Hearst’s lawyers to quit stealing their material. The “Fair Use” doctrine pretty much permits a link to someone else’s copyrighted material, a sentence or two or, if you don’t push it, maybe, and rarely, a few paragraphs (not really, but since I do that, I’m not about to admit it’s a violation of someone’s copyright, am I?). Brian the Blogger over at the Round Up’s been reprinting entire articles, which probably wouldn’t have stirred the corporate suits’ ire if he didn’t couple that over-broad use with an unrelenting attack on Greenwich Time, its editors and its reporters. Justified or not, (I don’t share his sentiments about former GT editor, Joe Pisani, for instance, who I like and who did a pretty good job, in my opinion) it’s been fun watching one citizen go after the local rag with a cudgel. They were a smug little paper that for too long was the only voice in town – no longer. 

But from what I remember of copyright law, I think the Round Up’s in the wrong here. My unsolicited advice is to take down the offending material, use future material sparingly and go at ’em again. The Round Up’s done a great job covering the fiasco at Hamilton Avenue, led a one-man campaign against the GT and our local police when they conspired (I use the term very loosely) to keep the identity of a drunk driver/killer a secret, and, in general, done a fine job of being a thorn in the side of formerly -powerful institutions. We need gadflies, damn it, and I’d hate to see the Round Up silenced. 

Now if its editor could only discover the spell check feature on Blogspot ….

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Can Fairfield Greenwich last as long?

Rye’s Tremont Group is closing up and will have dumped all workers by June. Both Tremont and FGG gave half their assets to Bernie Madoff to steal – the difference is that Tremont only had $6 billion total, so lost only $3 billion, while Walter Noel blew $7.5 billion. Same thing, but I’d think the larger size of Walter’s loss will bring him down way before June. Watch for those yard sale signs on Round Hill Road!

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435 Lake Avenue

435-lake-avenueA reader asked about the staus of this house so I checked: it’s been withdrawn, which doesn’t surprise me. The owner paid $5.5 million for it in 2005 and did an incredible renovation, taking everything down to the studs and rebuilding without destroying its original beauty. A fantastic job and I’m sure the expense justified a big asking price but $12.750 was over the top. Worse, although I don’t know this, he seems to have run out of money before restoring the landscaping. That’s not a huge deal but to ask this price while the grounds looked barren and neglected was poor marketing, at least.

So what happens now? I don’t know – perhaps the owner does. Or not.

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88 Richmond Hill Road

Here’s a beautiful house constructed a year or so ago and empty ever since (I think – at least, it’s empty now), not selling even though its price has been reduced a million dollars to $5.995 million. It’s big, well laid out with beautiful grounds including a pool, pool house and guest cottage. If the kids’ bedrooms are a trifle small, we just won’t mention that to those brats discussed earlier today and get on with it.

But get on with it at what price? Gila Lewis, the listing agent, swears it’s now priced to be the best value in Greenwich and I believe her, sort of – in another market, this house probably should have sold for its full asking price long ago. But when Gila handed me lists of comparable sales showing similar houses in this location that sold for $7, $8 and even $9 million, I felt as though I were receiving ancient parchments from the palsied hands of an old monk (sorry, Gila, engaging in bad hyperbole here) extolling the virtues of Londinium when the Romans still ran the place in 409. The Romans have gone, the natives have returned and no one’s enjoyed a steam bath in years.

Or whatever – the point is, I have clients who I am sure could see the value in this house as it is currently priced, but they’d hesitate to pay that because they don’t know what its value will be in three years. Not long ago, who cared? The price would be at least what they paid for it and probably more, but no one can be sure of that today. It’s all very well for me to tell them, “buy this and three years from now you’ll thank me for being a genius”,  but I have no intention of saying that. I don’t know what’s going to happen and neither, it seems, does anyone else. The argument that they should just pay what it takes to have a nice house and not worry about a future loss in value might work with a Madoff victim who still has any money left – $3.9 million out of $5.9 million would be a ‘return” that even Walt Noel would be jealous of but it’s not my money I’m recommending they plunk down, it’s theirs.

So I don’t push, and they don’t buy. It’s a poser.

But a nice house.

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“Oops! Here – ya want this? It’ll cost ya.”

69 Rockwood Lane

69 Rockwood Lane

I wrote about this place last week but it was on the tour today so I stopped by. It’s worth another mention. The house is an old, obsolete 1957 building, fronted and edged by swampland in a neighborhood that, while close to town, has never attracted high end builders. I say that without prejudice because my father bought a lot from the Rockefellers here in the early 50s and, if he hadn’t changed his mind and settled instead on Riverside, would have built a house that today would be as old an obsolete as this one. I understand.

Anyway, the estate of what was probably the original owner put this up for sale in April ’08 for $2.295 and, for reasons known best to their psychiatrist, the present builder/owners bought it for $2.729 million. The drugs and electro-shock must have worked, partially, because they have decided not to go ahead with their plans to build a house at a price the neighborhood won’t support and have instead returned the land to market, asking only $3,495,000, just a $766,000 premium to cover their time, trouble and psychiatry bills. If you’re feeling wealthy and generous, perhaps you can help them out; you’ll get a warm feeling and, so long as that feeling’s not from your untrained dog lifting his leg on you, all will be well with the world.

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Would you buy this house for $6 million?

41 Birchwood Drive

41 Birchwood Drive

My own clients won’t. They don’t like the swamp that surrounds it and they don’t particularly like the street. I can see their point about the swamp, and I’m not madly in love with the layout of this place, but it’s well made and will work for someone who wants lots of house (8,000 sf, + – the basement) and not a lot of land to look after. It does provide an interesting snapshot of the history of our recent boom. 45 Birchwood, right next door, was listed at $2.795 in February ’04, hung around unwanted for 232 days and then a bidding war broke out and the lucky winner took it for $3.02 million. He fixed it up a bit and put it back up for sale eight months later  in September 2005 for $5.7 million. That was a bit rich even for 2005 but he did sell it, finally, in May, 2007 for $4.9 million. Those were the days, for sellers.

But that was two years ago. This house has been completed and ready for a buyer to move in since April but so far, no one’s bit. The builder must be a man of principle and deep pockets, though, because he’s never budged from his opening price. I’m sure his neighbors are grateful.

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I spy … a contract!

10 Shelter Drive, CC

10 Shelter Drive, CC

But before you rush to raise the price of your own house, consider this: the house, a 1967 do-over in Cos Cob on an acre and with a pool, was originally listed in September, 2006 for the oddly original sum of $2,993,100. Odd integers didn’t do the trick and it has sat on the market for 2 1/3 years now, slowly dying, until its price was finally reduced to $1.995 million and it found a buyer. That’s a nice chunk of change, even if the actual selling price turns out to be still less, as I’m sure it will, but it’s a heck of a lot smaller than $3.0 million. We’ll need CEA’s calculator to figure out the exact difference between this seller’s dreams and the reach of his grasp, but it’s significant. Bummer.

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What were they thinking?

dukeWhen my favorite writer for the New York Times, Peter Applebome, (John Tierney could hold that title but he doesn’t mention me enough – sorry, John, but there’s always time) came to visit last April, he wrote an article “Fear in the Land of Mansions”.  I’d taken him on a tour of open houses and here’s what he said then:

As [Fountain] said on his blog the other day, real-estate brokers do not like it when their peers pass on any bad news, but, “Our selling clients certainly can figure out what’s going on, because their houses aren’t selling, so who are we supposed to be keeping in the dark?” He cited figures showing that as of the end of February, the number of sales in Greenwich was down 39 percent compared with last year.

The Greenwich market probably peaked in the fourth quarter of 2005 and has been slowing since, but this is the first time there’s a whiff of panic in the air.

After sampling the quiche and crudités at the lunch buffet in the empty kitchen of one of the new houses in the Golden Triangle area of Greenwich’s mid-country, the brokers wandered around with the air of picky estate appraisers.

Yes, it had the basics: 6 bedrooms, 7 ½ baths (it is practically illegal in Greenwich to build houses in which the future investment bankers of America don’t have their own bathrooms), master suite in the master wing, pool, spa. But at north of $10 million, in this market, well, maybe the closets were a tad small, the fixtures kind of ordinary, the mix-and-match exterior of stone and clapboard generic enough to be best described as neo-neo.

Mr. Fountain figured it would eventually sell for $7 million. Someone else said $7.5. The high estimate was $8, but she was talked down to $7.5 as well.

“It’s going to be an interesting market,” said one.

“It is an interesting market,” said a second.

“It’s going to be a challenging market,” said a third, and the escalation stopped there.

That was in April, 2008 and whatever our fears were for the state of the market, things got dramatically worse. The house Applebome was touring was 25 Dairy Road, built new in 2003, sold for $7.3 million in June, 2006 and put up for sale again by the new owner less than two years later, with no improvements added, for $10.5 million. Huh? The house was empty when we saw it and I believe it is empty still. I looked it up just now to see where it was and the price has been reduced – to $9.250. So the question is not only, what were they thinking, but what are they thinking?

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Hmmm

Just stopped back in the office after showing a house, then I’m off to the open house tour. Interesting point: while I was waiting for my client to show up, the listing broker fielded two calls to arrange other showings for the same property. Guess those bonus checks did have an effect. Glad to hear it.

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Buying surge?

Hardly, but as I reported yesterday, buyers were out over the weekend and making offers. Worst case I heard? A deal was struck, numbers and terms agreed on and the kids nixed the deal – their bedrooms were too small! I’ve seen the house and unless those kids are 6’7″, they need lessons in gratitude, not an additional inculcation of entitlement.

Reader KrazyKat wrote to point out that Wall Street did pay bonuses this year and those checks have begun landing in people’s mailboxes, which may explain the sudden revival in at least looking at houses. This story confirms that, but says many of the recipients are disappointed in what they received. They probably had huge bedrooms when they were kids.

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Did Fuld make a mistake putting his Florida house out of reach of his creditors?

This guy thinks he did, because it will give the prosecutors something to hang their hat on.Perfectly legal, but looks bad. I don’t agree. It seems to me that Fuld’s lawyers have assessed the chances of a prosecution and calculated that they are far less than the chances of huge civil suits which hold the possibility of draining even Dick Fuld’s bank accounts. If that assessment is right, it makes sense to shield whatever assets you can. Dick, I hereby volunteer to buy the North Street property for $100. I’ll live in it until all this is over and 10 years from now, sell it back to you (for fair market value, which might, in ten years, be more than $100).

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Banking 101

You work in the foreclosure department of a bank and have a house undergoing foreclosure. The borrower has rented out the place for $6,800, enough to service the loan and keep payments up and is faithfully turning every penny of the rent money over to you. Do you:

(a) count your luck stars, pocket the payment and hope the tenant stays in; or

(b) hound the tenant, sending over process servers at midnight, repeatedly, until he breaks the lease under his covenant of quiet enjoyment so that you can now forgo the rent, pay to heat and maintain the house and have it sit empty and deteriorating as the foreclosure case wends its way through the courts.

If you chose (b), congratulations, you are obviously destined for great things in the banking industry. Perhaps you’ll be put in charge of selling off bank-owned properties where you can reject any and all offers, ignore calls from realtors with clients interested in the house and have a grand time playing solitaire on your office computer.

If you chose (a) you’re obviously as stupid as I am and need an immediate course in eradicating common sense.

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We’ve said this all along

Surprise! Feeder funds fed Madoff because they thought he was front running. As I’ve suggested before, if you’re participating in a fraud, make certain you know who the victim is.

New York-based Fairfield Greenwich, which was founded by Walter Noel in 1983 and named after the county and city where he lives, was an international money machine. Its Fairfield Sentry Ltd. fund channeled all of its $7.3 billion in assets to Madoff, taking a cut of 1 percent of the total and 20 percent of the gains each year.

Family Ties

Noel, who declined to comment, built his global business in part on marriage. Three of his five daughters — who were profiled in a 2002 Vanity Fair piece titled “Golden in Greenwich” –married husbands who took Fairfield Greenwich’s business to far-flung lands.

One husband, Yanko Della Schiava, based in Lugano, Switzerland, was responsible for selling Fairfield’s offshore funds in Southern Europe, according to the firm’s Web site.

Another, Colombian-born Andres Piedrahita, led the European and Latin American businesses, working out of London and Madrid.

The third, Philip Toub, son of Swiss shipping magnate Said Toub, marketed the group’s funds in Brazil and the Middle East.

A fourth son-in-law, Matthew Brown, worked for the firm in New York.

For Madoff, the feeder funds weren’t only a way to gather money. They also enabled him to distance himself from individual investors. He didn’t like to socialize or hustle or answer questions, friends say.

Royal Treatment

The feeders were the gatekeepers, and they qualified for royal treatment. A money manager for a family office recalls accompanying Sonja Kohn, whose Vienna-based Bank Medici AG funneled $3.2 billion to Madoff, to a meeting with Madoff in New York in 1991.

He says Madoff treated her as if she were the Queen of England. The money manager also says Madoff wouldn’t answer any questions about his strategy.

A delegation from Credit Suisse Group AG, led by Oswald Gruebel, then head of private banking, had a similar experience in 2000. Gruebel, whose bank had about $500 million invested in Madoff funds at the time, wanted to know why the firm had an obscure auditor, why Madoff didn’t have a third-party custodian hold his clients’ assets and how much money he was running.

After the fifth or sixth query, people who were at the meeting say, Madoff ended the session.

Gruebel’s Warning

“You guys, if you are not happy with the returns you are getting,” he said, “you can take your money.”

Gruebel, 65, who retired as chief executive officer of Credit Suisse in 2007, urged clients to withdraw from Madoff’s funds, according to three people familiar with the matter.

Only about half of the money was taken out, the people say, indicating that many clients preferred Madoff’s returns to Gruebel’s advice.

That’s why it’s hard to weep for some of Madoff’s victims, says James Walsh, author of You Can’t Cheat an Honest Man (Silver Lake, 1998), a study of Ponzi-scheme perpetrators and victims.

“We’ve become a nation of investors, but nobody wants to do the work of applying Benjamin Graham’s analysis tools,” Walsh says, referring to the father of value investing. “They want a genius to give them a shortcut. That’s what made it a target-rich environment for Madoff.”

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